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Exchange Rate Risk and Interest Rate: A Case Study for Turkey

  • Hakan Berument
  • Asli Günay

    ()

This paper examines the effect of exchange rate risk on interest rates within the uncovered interest rate parity condition for Turkey. When the interest rate is measured with the Treasury auction interest rate and the exchange rate risk is measured with the conditional variance of the exchange rate, then we found that there is a positive relation between the exchange rate risk and interest rate with the data from December 1986 to January 2001. Copyright Kluwer Academic Publishers 2003

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File URL: http://hdl.handle.net/10.1023/A:1021243101272
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Article provided by Springer in its journal Open Economies Review.

Volume (Year): 14 (2003)
Issue (Month): 1 (January)
Pages: 19-27

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Handle: RePEc:kap:openec:v:14:y:2003:i:1:p:19-27
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  1. Akcay, O. Cevdet & Alper, C. Emre & Karasulu, Meral, 1997. "Currency substitution and exchange rate instability: The Turkish case," European Economic Review, Elsevier, vol. 41(3-5), pages 827-835, April.
  2. Bruce Felmincham & Peter Mansfield, 1997. "Rationality and the Risk Premium on the Australian dollar," International Economic Journal, Taylor & Francis Journals, vol. 11(3), pages 47-59.
  3. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
  4. Hakan Berument, 2005. "Measuring Monetary Policy for A Small Open Economy : Turkey," Working Papers 0509, Department of Economics, Bilkent University.
  5. Hakan Berument, 2005. "Measuring Monetary Policy for A Small Open Economy : Turkey," Working Papers 0509, Department of Economics, Bilkent University.
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